Identifying Project Factors That Affect an Investor’s Escalation of Commitment in Public-Private Partnership Projects

Abstract

The study comprehensively discusses 18 project factors affecting investors’ escalation of commitment (EOC) in a public-private partnership (PPP) project. Using factor analysis, five factor groupings were addressed: the project information and economic benefit, the reward and punishment mechanisms, project uncertainty, the degree of participation and completeness, and the resources invested in the project. The results revealed that the influence of five grouping factors on investor’s EOC is not independent; after performing the weight analysis, the 18 factors had different influences on EOC. These findings offer effective suggestions and theoretical guidelines for reducing the risk of investor EOC.

Pengaruh Gender Dan Faktor Risiko Individu Terhadap Perilaku Eskalasi Komitmen

“…Penelitian yang dilakukan oleh Sleesman et al (2012) telah melakukan metaanalysis terhadap faktor-faktor yang memengaruhi eskalasi komitmen yang dapat dikategorikan menjadi project determinants, psychological determinant, social determinants, dan structural determinants. Sebagian besar penelitian terkait dengan eskalasi komitmen hanya berfokus pada faktor-faktor yang berasal dari kinerja suatu proyek (Berg et al, 2009;Schulz et al, 2002;Engelbrecht, 2017;Liu et al;2019). Faktor proyek diketahui memiliki peranan yang penting dalam proses pengambilan keputusan, karena juga dipengaruhi oleh beberapa hal seperti lingkungan proyek, jenis investasi, pendapatan yang diharapkan, biaya yang telah dikeluarkan, tanggung jawab dari pengambil keputusan, dan tingkat keberhasilan penyelesaian dari suatu proyek (Niu et al 2012;Khavul et al, 2011;He et al, 2007).…”

Investors’ exit timing of PPP projects based on escalation of commitment

“…For example, Arbuthnott (2013) examines commitment escalation in the fossil fuel industry and infrastructure industry and advises on how policymakers can reduce commitments [35]. Liu et al(2019) explored 18 factors affecting the commitment of investors in a PPP project and divided the influencing factors into five categories: project information and economic benefits, reward and punishment mechanisms, project uncertainty, level of participation and resources invested [36]. Through factor analysis and calculation, project information and economic benefit groups have the greatest influence on investors' income distribution.…”

Value of Investors’ Escalation of Commitment in PPP Projects Using Real Option Thinking

“…Typically, EOC involves the interplay of four sets of forces over time (Ross & Staw, 1993). Under this rubric, project determinants are objective aspects of a project, such as the sunk cost (Chung & Cheng, 2018;Moon, 2001;Staats et al, 2018), guarantees (Zardkoohi, 2004), information asymmetry (Berg et al, 2009), reward and punishment mechanism (Liu et al, 2019a), and salvage value (Ross & Staw, 1993). The psychological determinants mainly refer to personalities, emotional elements and cognitive styles of investors, including selfesteem (Schaumberg & Wiltermuth, 2014), ego depletion (Lee et al, 2018), neuroticism (Moon et al, 2003b), anticipated regret (Sarangee et al, 2019;Wong & Kwong, 2007), paradox mindset (Wong & Kwong, 2018), risk preference (Whyte, 1986) and rational thinking style (Wong et al, 2008).…”

“…Decades of research have explained EOC from different perspectives, such as cognitive dissonance theory (Festinger, 1962), psychological commitment theory (Kiesler, 1971), self-justification theory (Staw, 1976), mental budgeting theory (Heath, 1995) and prospect theory (Kahneman & Tversky, 1979). EOC is determined by various factors, such as sunk costs (Chung & Cheng, 2018;Keil et al, 1995;Moon, 2001;Staats et al, 2018), guarantees (Zardkoohi, 2004), information asymmetry (Berg et al, 2009), self-esteem (Schaumberg & Wiltermuth, 2014), anticipated regret (Sarangee et al, 2019;Wong & Kwong, 2007), ego depletion (Lee et al, 2018), paradox mindset (Wong & Kwong, 2018), reward and punishment mechanism (Liu et al, 2019a), the decision responsibility and decision-maker involved (Boulding et al, 2016), competitors (Hsieh et al, 2015), risk preferences (Whyte, 1986) and cultural backgrounds (Drummond, 2014). Conclusively, current studies on EOC have focused on theoretical explanations and influential determinants while remaining relatively silent on the threshold for investors' EOC.…”